George Osborne has refused to be drawn on the cost of the Libyan intervention, following comments at the weekend by Danny Alexander that it would reach "hundreds of millions" of pounds.

The chancellor and his chief secretary to the Treasury, both present in the Commons, were pressed to confirm the figure by the shadow chancellor, Ed Balls, during Treasury questions. Balls said that in March the government had said the operation would cost "tens of millions not hundreds of millions". Instead it was announced there will be a Ministry of Defence statement next week.

On Sunday Alexander told Sky News: "The campaign is costing tens of millions, potentially into the hundreds of millions as it goes on, but that money is coming from the reserve that we have set aside, precisely for contingencies such as this."

When the military campaign started, the chancellor said the cost would be "in the order of tens of millions of pounds, not hundreds of millions".

Since then, defence economists have warned that it could reach £1bn if the campaign stretches on into the autumn.

The news came as a minister in Libya's opposition force, the National Transition Council (NTC), wrote an open letter challenging the decision by the UK attorney general, Dominic Grieve, not to release funds to the rebels. Dr Ali Tarhuni, minister for finance and oil in the NTC, said the body would run out of funds in less than a week, according to journalists in Benghazi.

Grieve has said Britain can not release the 1.4bn dinars (approximately £700m) printed by De La Rue – Britain's banknote printer – which have been impounded in the UK as the revolution has unfolded.

De La Rue printed Libya's currency during Gaddafi's rule, and in an attempt to cripple his regime, the UK impounded the near $1.5bn-worth of dinars. Now Libya's opposition forces believe they should be allowed the money impounded in the UK or risk being unable to fund continuing operations.

Last month the Grieve said he was not legally able to release the funds.

Tarhuni wrote: "Here in Benghazi we cannot sufficiently express our gratitude for the support the UK has extended to Libyans during our struggle against the tyrannical regime of Muammar Gaddafi. Together with her international partners, the UK has played a leading role in this defining battle for a free Libya. No one will ever forget this act of generosity and support for a democratic state.

"[But] at present we face a liquidity crisis which threatens the stability of liberated Libya. With every day that passes we approach financial collapse. Funding pledges from international donors have yet to materialise. Our monthly salary bill, meanwhile, is in the region of 340m dinars. At present our money supply is almost finished.

"The neatest short-term solution to this crisis is for the UK government to release the 1.4bn dinars printed by De La Rue and currently sitting in Britain.

"We are deeply grateful that London has impounded this money, which was originally intended for the Tripoli regime. We would now ask the UK to exert every effort to take the next step and transfer this physical cash to the NTC to enable us to keep our economy afloat and pay our people.

"Although there are inevitably serious legal issues that must be dealt with relating to the release of the De La Rue dinars, we sincerely hope the UK can give this burning issue the urgent attention it deserves. The future of a stable Libya after Gaddafi is too important to let this issue fester."